Canadian and especially B.C. taxpayers aren't adequately protected in the event Enbridge Inc.'s proposed Northern Gateway oilsands pipeline suffers the same kind of catastrophic failure that resulted in a $765 million U.S. — and counting — spill in Michigan two years ago, says a former senior Canadian insurance executive.

OTTAWA — Canadian and especially B.C. taxpayers aren't adequately protected in the event Enbridge Inc.'s proposed Northern Gateway oilsands pipeline suffers the same kind of catastrophic failure that resulted in a $765 million U.S. — and counting — spill in Michigan two years ago, says a former senior Canadian insurance executive.

Former Insurance Corp. of B.C. chief executive Robyn Allan also argues the 2010 U.S. disaster proves Enbridge is underestimating the potential of human error turning a relatively minor spill into a major one.

She made the assertions in a submission filed last month at the request of the Joint Review Panel (JRP), which was established under the authority of the National Energy Board and the Canadian Environmental Assessment Act. The JRP, which has sent written questions to Enbridge as well as to Allan about the company's ability to cover costs if there's a massive spill, is due to release its findings in late 2013.

The panel was established by the Harper government to consider the economic, social and environmental consequences of the $5.5 billion megaproject.

Enbridge assured the JRP earlier this year that if insurance doesn't cover damages in the event of a spill, the money could be raised from the company's cash reserves, by borrowing, or even by selling assets.

"Regardless of whether or not insurance covers losses and liabilities of Northern Gateway and/or third parties, Northern Gateway would make good the damages which it has caused," the company said.

But Allan pointed in her submission to the corporate entity that will own and operate the Alberta-to-B.C. pipeline — the Northern Gateway Pipelines Limited Partnership — will be distinct from the Calgary-based corporate giant Enbridge Inc., which had $19.4 billion in revenues and just under $1 billion in profits last year.

"The purpose of the structure Enbridge has chosen — a limited partnership — is to limit the exposure investors have for liabilities of the company, not to 'make good' on (a) catastrophic spill event," she told the JRP.

"Enbridge is claiming something it cannot guarantee the limited partnership will deliver."

She said a major spill that resulted in an extensive shutdown of the pipeline operation would compromise the economic viability of the project, limiting its ability to generate sufficient cash flow to repair damage and satisfy claims.

That ability to cover costs would be made worse if economic conditions, such as lower world oil prices, and the higher cost to run the pipeline made it more attractive for shippers to seek alternative ways to get oilsands crude to market.

She mentioned in an interview this week options such as the Kinder Morgan pipeline from Alberta to Burnaby, B.C., which will undergo a major capacity expansion if the company gets its proposal approved by the Harper government.

Allan also challenged the company's claim it could sell assets, given that the two pipelines and the marine terminal in Kitimat are the only significant assets of a single industrial megaproject.

"The sale of assets on a single integrated system is a form of cannibalization."

The ex-ICBC head argues the company should be required to purchase a dedicated insurance policy that would cover at least $1 billion in claims.

She also urged the JRP to consider ways to make Enbridge Inc. liable for damages if the limited partnership falls short.

Enbridge, asked this week by Postmedia News to respond to Allan's assertions, issued a written response cleared by the company's legal department.

"As a responsible company we assess exposures to risks on an ongoing basis to identify, control and mitigate potential impacts to the public and to Enbridge," the statement read.

While insurance is "one strategy" to manage risk, "commenting on what insurance coverage will be available in the global insurance market when a given proposed project is complete is speculation."

Allan argued in her submission to the JRP that Enbridge is basing its risk assessment in B.C. and Alberta on the company being able to detect and deal with leaks within minutes.

But Allan pointed out that it took 17 hours before the company reacted to the Michigan spill of more than 20,000 barrels of bitumen crude.

That 17-hour delay after the first alarm warning was sounded was cited repeatedly in the U.S. government's explanation earlier this week of the $3.7 million U.S. fine.

Enbridge, despite the Michigan disaster, has refused to use that experience as a benchmark to put a dollar figure on the potential cost of worst-case-scenario spills involving Northern Gateway.

It said in one submission that a spill's "environmental and social consequences" and subsequent clean-up costs depend on factors such as location, the weather and time of year, its proximity to sensitive areas, the volume of oil spilled, and company actions taken after the spill.

"Given the complex nature of how the above factors interact, it is not possible to predict the financial cost of a spill," the JRP was told.

The company told the panel that it intends to buy insurance during the construction phase, but wouldn't make the same commitment once the pipeline is up and running.

The current projected start-up date is late 2017.

"Northern Gateway would evaluate the options it has available for insurance and the merits to either being covered under Enbridge Inc.'s consolidated insurance programs or procuring coverage on a stand-alone and exclusive basis."

Allan noted in her submission Enbridge Energy Partners (EEP), the limited partnership that operates the Michigan pipeline that ruptured in 2010, filed a document with the U.S. Securities and Exchange Commission which underscored the limitations of insurance in the pipeline industry.

The company told shareholders in 2010 that it "can make no assurance that the insurance coverage we maintain will be available or adequate for any particular risk or loss or that we will be able to maintain adequate insurance in the future at rates we consider reasonable." In addition, "a substantial uninsured loss could have a material effect on our financial position."

A more recent report to shareholders noted that the Kalamazoo River spill in Michigan in 2010 exceeded the maximum $650 million in pollution damage under a policy that expired in April of 2011.

It said the total cost of the spill up to March of 2012 is $765 million, though it said that figure could change in the event of new developments such as fines.

Earlier this week the U.S. Department of Transportation proposed a $3.7 million U.S. fine against EEP, as punishment for various missteps in the handling of the spill, and gave the company a month to respond.

Allan said the possibility of a Northern Gateway disaster coinciding with another major Enbridge insurance claim in the same year would further put taxpayers at risk.

She also pointed out that Enbridge's submissions to the JRP about potential spills doesn't take into account the possibility of human error.

Allan said in an interview that the costs of a spill, if the company was unable to cover losses, would be borne disproportionately by B.C. residents, businesses — especially in the tourism and fishing industries — and the provincial government.

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